Top N.C. companies trailed market

Only 17 of the state's 50 largest publicly traded companies by revenue posted any gains.

adunn@charlotteobserver.comDecember 31, 2011 

Stocks had a rough ride in 2011. Stocks at North Carolina's biggest companies had it even rougher.

Of the state's 50 largest publicly traded companies by revenue, just 17 posted gains for the year, a Charlotte Observer analysis shows. That compares with gains from about 45 percent of the S&P 1500, a broad measure of the overall market.

The biggest winner this year was Greensboro-based VF Corp., an apparel manufacturer that owns brands like Wrangler jeans and The North Face. Its shares jumped more than 47 percent.

Charlotte's Goodrich Corp. came in second at 40 percent, boosted by news that it would be sold. Matthews-based Family Dollar Stores Inc. again ranked near the top with a 16 percent gain.

But a pair of Charlotte-based companies, Bank of America Corp. and shipping company Horizon Lines, saw much of their value erode in the volatile markets. Bank of America was the worst performer among the 30 stocks in the Dow Jones Industrial Average, losing 58 percent of its value.

"It's a real whipsaw this year, and it's been very tough," said Judson Gee, principal of JHG Financial Advisors in Greensboro.

The North Carolina 50 ranges from Bank of America, with annual revenue north of $100 billion, to Charlotte's Medcath Corp., which brings in about $320 million.

As with the market as a whole, the N.C. companies that fared well generally had strong financial performance and large dividends. It was a year when investors sought better return for their money amid historically low interest rates on municipal and U.S. Treasury bonds.

"The credit quality of corporate America is substantially better than the credit quality of the federal government," said Lawrence Fuller, managing director of Fuller Asset Management LLC in Charlotte. "There's a gravitation toward dividend payers."

If you had put $100 into each of the N.C. companies at the start of the year, you'd have lost 10.5 percent of your money.

By comparison, the S&P Composite 1500 index finished almost exactly even, down only three-tenths of a percent.

Winners and losers

VF Corp., the apparel maker, consistently exceeded analysts' earnings estimates, doing so by nearly 30 cents per share in the third quarter. Its revenues are up year over year, and its dividend reached 72 cents per share in the fourth quarter.

Goodrich, the Charlotte-based aerospace company, had the second-strongest return, at just above 40 percent. Its stock saw most of its gains in the week before Connecticut-based United Technologies Corp. announced it was buying the company, as rumors swirled about the impending acquisition.

Also in the top five were two of the state's big tobacco companies: Camel maker Reynolds American, based in Winston-Salem, and Greensboro-based Lorillard, maker of Newports. Both companies increased their wholesale prices twice this year and offered sizable dividends.

"I've been advising my clients to be in the dividend payers," Gee said, noting that's an especially prudent course in an uncertain economy. "Just for owning the stock, you get an instant 5, 6 percent return."

The economy boosted some companies, like Family Dollar - which ranked in the top 10.

But companies near the bottom posted steep declines. Fourteen shed more than 20 percent.

Bank of America, beleaguered by worries about its capital position, mortgage liability and financial uncertainty in Europe, lost nearly 60 percent of its value.

Charlotte shipping company Horizon Lines lost about 96 percent of its value, falling to an adjusted $4.35 a share.

Earlier this month, Horizon Lines executed a 1-for-25 reverse stock split to try to raise the price. The company paid $45 million in January to settle federal price-fixing allegations. The New York Stock Exchange delisted the stock in October.

Great volatility

Despite ending up in roughly the same place, the stock market this year was anything but even.

Through August, nearly 20 percent of trading days saw swings of 1 percent or more, Gee said. Between August and November, there were 16 days of swings of 5 percent or more. And the North Carolina 50 were even more volatile than the market.

While the industrial stocks and the energy and materials sectors started out the year strong, Fuller said, the earthquake and nuclear disaster in Japan, Europe's financial crisis and a slowing U.S. economy turned the market on its head.

"As the market tailed off, leadership swung," Fuller said. "Where we're finishing the year is a lot different from where we started."

Across the market, what survived were the old stand-bys: Utilities (like Raleigh's Progress Energy, up 29 percent, and Charlotte's Duke Energy, 24 percent), consumer staples and health care companies.

"I don't think you're seeing money going into these companies for the upside growth potential, it's the income," Fuller said.

Stock market analysts are not overly bullish on the year ahead. European worries persist. Estimates of GDP growth are muted. And in an election year, experts don't predict much movement on the federal deficit.

"It's just not a good environment," Fuller said. "I can't see any way the markets are going up in that type of environment."

The S&P 1500 peaked in late April at 316.45 before falling to a yearly low of 252.30 in early October.

Fuller said he expects the market to again flirt with those October lows before eventually rebounding.

"Things have to get worse before they get better," Fuller said. "And that's kind of where we are right now."

Dunn: 704-358-5235

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